Aug. 20 (Bloomberg) -- Target Corp., still struggling to
rebound from last year’s hacker attack, cut its forecast for the
year as slumping sales and a money-losing push into Canada take
a toll on profit.

Target now expects full-year earnings of $3.10 to $3.30 a
share, excluding some items, down from a previous forecast of as
much as $3.90, according to a statement today. Analysts had
predicted $3.44, the average estimate compiled by Bloomberg.

The bleaker forecast follows a preliminary earnings report
on Aug. 5 that fell short of expectations, signaling that the
company’s comeback effort will be slow going. Target has been
struggling to boost U.S. traffic, repair its botched Canadian
expansion and regain shoppers’ trust after hackers stole
millions of customers’ data last year. The retailer hired
PepsiCo Inc. executive Brian Cornell as its new leader last
month, following the ouster of Gregg Steinhafel in May.

Target is relying heavily on sales promotions to entice
shoppers, but it doesn’t seem to be working, said Brian
Yarbrough, an analyst at Edward Jones & Co. in St. Louis. That
means Target is squeezing margins without much benefit.

“We would like to see those promotions drive more
traffic,” he said. “Otherwise it’s a double negative.”

Third Quarter

Target also said that earnings will be 40 cents to 50 cents
a share in the third quarter, excluding some costs. That missed
the average analyst estimate of 66 cents.

Second-quarter net income fell to $234 million, or 37 cents
a share, from $611 million, or 95 cents, a year earlier, the
company said today. Excluding some items, the earnings were 78
cents a share, matching the figure it gave on Aug. 5. Before
that report, the Minneapolis-based company had projected 85
cents to $1 for the period, which ended Aug. 2.

While comparable-store sales were unchanged in the U.S.
last quarter, they decreased 11 percent in Canada. Target blamed
the drop on the fact that the locations had grand-opening events
in 2013, generating traffic that was hard to match this year.
The Canadian business lost $204 million before interest and
taxes in the period, compared with a $169 million deficit a year
earlier.

Canadians, who for years shopped at Target just over the
border in the U.S., have been unimpressed by its expansion into
the country. They found prices at the local stores were higher,
while the retailer failed to keep enough merchandise in stock.
Target, which hired a new leader to run the operation, said this
month it will begin matching rivals’ prices and improving its
supply chain in a bid to change that impression.

Resurgence Ahead?

U.S. traffic began to rebound in July and have continued to
improve in August during early back-to-school shopping, said
Chief Financial Officer John Mulligan, who served as interim
chief executive officer before Cornell was hired.

“While results from the quarter didn’t meet our
expectations, we are seeing some early signs of progress as we
work to improve results in the U.S. and Canada,” he said in the
statement.

The stock gained 1.8 percent today to close at $60.33 in
New York. It has fallen 4.6 percent this year, compared with a
4.7 percent drop for Wal-Mart Stores Inc. and 7.5 percent gain
for the Standard & Poor’s 500 Index.

Target relied more heavily on promotions last quarter to
fuel sales, which lowered its gross margin to 30.4 percent from
31.4 percent a year earlier. Still, cost cutting helped reduce
its selling and overhead costs, the company said.

Hacker Attack

The company also said it had $148 million in breach-related
expenses in the quarter, including money set aside to cover
existing and potential claims related to the data theft. Those
expenses were partly reduced by $38 million in insurance.

Hackers struck the company last year during the height of
the holiday shopping season, tarnishing its reputation and
hampering sales. Steinhafel held himself personally responsible
for the breach, contributing to his ouster as CEO this year.

On Aug. 12, Cornell became the first outsider ever to take
the reins at Target. In the past three decades, he’s worked for
at least six different companies, including PepsiCo, Wal-Mart,
Michaels Stores Inc. and Safeway Inc.

As part of his turnaround effort, Cornell is working to
boost Target’s e-commerce orders. So far, though, Internet sales
aren’t enough to make up for the slowdown at brick-and-mortar
stores, Yarbrough said.

“Online sales are growing nicely, but it’s still a small
piece of the pie,” he said.